May 30 (Reuters) - U.S. stocks advanced on Wednesday, with gains in energy and banking shares aiding the recovery from a steep selloff in the previous session due to concerns over Italy's political crisis.

Italy's two anti-establishment parties- the 5-Star Movement and League - renewed efforts to form a government, raising hopes that Europe's third largest economy could avoid a new election.

The news restored some calm to the U.S. equity markets, which saw steepest one-day percentage decline in a month on Tuesday on worries about the stability of the euro zone.

"It's a rebound from yesterday on hopes that there may be some agreement on forming a government. But these kind of perceptions are going to bounce back and forth," said Scott Brown, chief economist at Raymond James in St. Petersburg.

Crude oil prices rose more than 2 percent, supported by tight supplies and forecast of lower U.S. inventories despite expectations OPEC and its allies will pump more in the second half of 2018.

At 11:30 a.m. EDT the Dow Jones Industrial Average was up 188.89 points, or 0.78 percent, at 24,550.34, the S&P 500 was up 25.41 points, or 0.94 percent, at 2,715.27 and the Nasdaq Composite was up 59.59 points, or 0.81 percent, at 7,456.18.

Latest data showed U.S. economic growth in the first quarter slowed slightly more than initially thought amid downward revisions, but a robust labor market and income tax cuts are likely to boost activity this year.

Another data showed that private employers maintained a steady pace of hiring this month.

"The reality is the underlying economic data is good enough to grind the market higher," said Phil Blancato, CEO of Ladenburg Thalmann Asset Management in New York.

"This isn't a 20 percent year on the S&P 500, but it certainly is a year where we could see a 6-8 percent rate of return because the data is strong enough and the valuations are now cheap enough to get the market higher."

Bank stocks, which were the worst hit on Tuesday, recovered with the S&P financial index rising 1.2 percent.

Investors also kept a wary eye on the developments around tariffs and trade. In an unexpected change in tone, the United States said late on Tuesday it could still impose tariffs on $50 billion of imports from China unless it addressed the issue of theft of American intellectual property.

China said on Wednesday it was ready to fight back if Washington was looking for a trade war, days ahead of a planned visit by U.S. Commerce Secretary Wilbur Ross.

Advancing issues outnumbered decliners by a 4.05-to-1 ratio on the NYSE. Advancing issues outnumbered decliners by a 3.29-to-1 ratio on the Nasdaq.

The S&P index recorded 23 new 52-week highs and one new low, while the Nasdaq recorded 156 new highs and 15 new lows. (Reporting by Medha Singh in Bengaluru; Editing by Arun Koyyur)